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Tag: investment in indian economy

  • Is Spending Good for the Economy? Should We Save or Invest?

    Money has always been the prime driving factor of any economy since human settlements started to be sophisticated. From the barter system to the current complicated transactions, the value of services and objects has always been a determining factor. And this value is satisfied today largely through the use of money.

    As our economy goes through its highs and lows, it is inevitable that people get confused as to whether they should spend money or save money. This is also because of the fact that there is an unending cycle caused due to the necessity to save money to buy services and to spend money to buy services.

    We have always been taught to save money as much as we can. The more we save and the less we spend, the better will be the financial security and stability of our economy. This is something that is constantly fed on to us.

    However, Economists across the world have a different opinion in this regard. They say that consumers should strike a balance between spending and saving. It will be harmful either for the individual or the economy if this balance goes off.

    Why you should spend money to Support the Economy?
    Things to know before you spend to Support the Economy
    Why you should save and invest money to Support the Economy?
    Things to Know about Savings

    Why you should spend money to Support the Economy?

    GDP of India
    GDP of India

    As far as the economy is concerned, consumer spending is a very important thing to keep it stable and better. Had the rich people of the past and present decided to save their money in their closet without spending it, there would have been absolutely no progress in the economy.

    The national economy improves only when there is a healthy flow of money through all units of transactions. This is because when you make any kind of large purchase like a house, car or shop; it creates a ripple effect in the economy. It will start to benefit the people associated with the industry and the other local businesses. This is due to the circular flow of money in the economy. Your spending will become another person’s income and vice versa.

    Lack of consumer spending can even lead to an economic slowdown. This happens because of the before-mentioned ripple effect. When money doesn’t flow, companies will be unable to reach their profit margins, there will be losses, it will in turn affect the incentives and salaries of the employees which will further affect the people who are dependent on them. Like drivers, house helpers, street vendors etc.

    When that happens, the purchasing power of people is affected which will adversely impact the supply-demand nuances of an economy. It can even lead to a recession when left unchecked.

    Spending also does not mean that you should use up all your money. It should be in ways that will benefit you immediately or in the longer run. It should first satisfy all your needs. When it comes to wants, you need to analyse what all you actually have to spend for and take a decision that best suits your conscience.  

    Things to know before you spend to Support the Economy

    Check your surroundings

    The fact that you should spend money does not mean that you should do it blindly. There are a lot of things that you need to consider before that. The spending capacity of every person varies, and it is based on this capacity that one should control their spending.

    Career and Spending

    The first thing that one needs to look for is the general employment condition. Analyse if the job you are in at the moment is stable, is it in demand, are there any chances of layoffs etc. Apart from that, analyse the growth of your company as well. If it is expanding over the years, then it is a positive sign.

    You need to have a backup plan if there are any chances for unprecedented repercussions. For example, uncertainty is more if your company depends on something external for their expansion like weather, any particular raw material etc.

    Family Planning

    Your spending should also depend on the nature of your family. Have a thorough analysis of the future plans of your family, your health conditions and also your parent’s plans. Your spending pattern will vary depending on whether you and your partner are planning to have any children, expecting any large repairs on your assets, potential health issues, or retirement plans of your parents, among other things.

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    Why you should save and invest money to Support the Economy?

    While we talk about the importance of spending to boost the economy. Let’s not forget that all kinds of spending are not the same. It should have a long-term reciprocal benefit as well. A logical analysis of the economy shows that the route to improved productivity of a nation lies in the improvement of capital goods.

    This can be done only when you save your money and invest it in productive activities. However, be mindful that saving is totally different from hoarding. This is the reason why it was said earlier that one needs to strike a balance between spending and saving.

    Saving does not mean dormancy of your money. It simply means that it is entrusted with productive activities that will subsequently improve the economy, unlike hoarding.

    Things to Know about Savings

    People tend to inherently have an attitude to save money due to the constant reinforcement we have had about financial management. However, everybody needs to know about certain nuances and advantages of savings and how they will impact the economy.

    Safe haven

    If you have good savings means you are better protected against debt. You can cover your unexpected expenses without taking a loan. It is indeed a great relief considering the repercussions that a thoughtless loan can have. Along the same line, it will help you control your living expenses and thereby finish your loans as soon as possible. This means that your ability to recover during an economic hardship is higher and that will further improve the chances of recovery of the economy. It also means that you are better protected when you are living on your own means.

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    Inflation and Savings

    Savings are not without any risks. Depending on the condition of your nation’s economy the value of your savings can increase, remain constant or depreciate. People who save and invest will have to pay a huge price if the economy goes through a recession. So brace yourselves for uncertainties and losses while you save as well.

    Knowing the Difference

    The balance that we need to have between spending and saving is the most important discipline that we need to follow to support the economy. To spend does not mean that you should use your money to buy all the things you want.

    Neither does that mean that you should donate everything you get. You should be able to analyse your needs and wants. Have a critical approach to decide on which all of your ‘wants’ should you address after satisfying your needs.

    This critical approach goes for saving as well. Saving all your money in your drawer does not help you or the economy. For your savings to improve, you need to channelise them in the right direction. Make sure that they are productive activities and will positively influence your savings. It is also important to remember that savings do not equate with hoarding.

    Conclusion

    As responsible citizens, we need to be mindful of the options we have with regard to supporting our economy. At the end of the day, a healthy and expanding economy will be beneficial to each one of us. When you spend, make sure to do it in a way that is most useful to most people around you. And while saving too, make sure that it improves over time. Let’s all do our part to help our nation prosper.

    FAQs

    How does spending increase economic growth?

    Higher government spending will also have an impact on the supply-side of the economy – depending on which area of government spending is increased.

    How do you build a strong economy?

    Keeping Manufacturing Units in the Country and reducing the cost of borrowing and increasing consumer spending and investment can help in building a strong economy.

    Is saving bad for economy?

    A rising personal saving rate can temporarily slow economic activity, assuming no other changes to income.

  • Black Money Scenario in Startup World: A Detailed Analysis

    India is the birthplace of cultural, grassroots, and frugal innovation. The population of over one billion people makes this an exciting geography for startups to build repeatable and scalable business models. The beauty of startups is that they provide their employees freedom, the opportunity to innovate and explore rather than just to engage in unproductive work. There exists black money within this rising economy of startups.

    Introduction to Black Money in Startups
    Current Scenario and Analysis of Black Money in Startup World
    How Whitewashing of Black Money is Done?
    Impact of Whitewashing Black Money on the Economy
    Black Money in Startups – Conclusion
    Black Money in Startups – FAQs

    Introduction to Black Money in Startups

    “The Indian startup ecosystem is said to be the third largest in the world having added over 1,300 tech startups in 2019. Number of Indian unicorns could increase to 95-105 by 2025,” says Nasscom president Debjani Ghosh.

    Home of the largest e-commerce deal between Walmart and Flipkart, 31 unicorns and counting, and plenty of untapped opportunities — it shouldn’t come as a surprise that India has been home to some of the biggest startup success stories. Over the years, Indian startups have found success across sectors, with startups in enterprise tech, e-commerce and travel tech grabbing global attention. There has, however, been a grey cloud spanning the growing startup industry in recent years, something we are all familiar with – black money.

    Canadian-Indian writer Rohinton Mistry says, “It is so much a part of our white economy, a tumour in the centre of the brain — try to remove it and you kill the patient. A 2015 FICCI report estimated black money in India to be as high as 75 per cent of the GDP.”

    In today’s world, it is difficult to explain how a social anomaly could appear in the world of budding talent, making the next generation soar to the highest levels of recognition and profit. This anomaly increases the need for black money in startups or businesses. The purpose of this case study is to analyze the entry of black money into the industry, the factors that influence it, and how it is being whitewashed, as well as the impact this has on our economy.

    Current Scenario and Analysis of Black Money in Startup World

    Let’s look upon the case where a reputed startup lawyer (let’s name him ‘A’) in the capital has worked with startups including two well-known hotel room aggregators, a funded media startup and few e-commerce firms. He is also involved in deals with a well-known real estate group in the country that is trying to dabble into tech startups. He gives a shocking revelation: “Some expatriate businessmen are using startup investing as a way to move black money into India.”

    Here’s the underside, suppose you have $10 million cash parked in Mauritius. You look for tech startups where you can take a majority control or create an entity that can furnish a website, an app and a small team in place. You incorporate the company as a private limited entity and also register an overseas subsidiary. Once a legal structure is in place, you start routing the overseas money into that technology company.

    The routing can happen on the seed stage – A funding round. Now to embezzle the funds, from that startup money you can buy a luxury car and other assets, pay yourself, your kin huge sums as directors. You run that company for a period of two years or more till you’ve routed all the money into India. Once done, you can simply close that startup, declaring the company bankrupt and paying off creditors and share-holders which might be your own companies. Even if they have not routed the money overseas, dabbling in startups by opening up mentorship firms has become easy and a glam route to use that money legally.

    “Am not saying all such firms are using startups as a means to turn black money into white but this glamorous route has started to be misused in India,” says A, a managing partner of the law firm, requesting anonymity.

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    How Whitewashing of Black Money is Done?

    Another lawyer (let’s name him lawyer B) who is brokering deals for a Gurgaon-based fashion app and another small hotel rooms aggregator ratifies it. His firm which specializes in transaction advisory for tech startups says that there are many ways dishonest businessmen launder.

    • An unsavory investor makes his family members the board members of that startup.
    • Other companies of the same group act as vendors to that startup and quote ridiculous prices for that service or product.
    • These investors ask for too much equity and control of the startup (often over 70%). They wish to keep their kin on board.
    • They park the money in a trust-friendly jurisdiction, such as Switzerland, before it is moved to a tax-efficient country such as Cyprus, where the taxation levels are very low or have no taxes. It is then routed to a tax-friendly country like Mauritius, before reaching the final destination in India. India has a Double Taxation Avoidance Treaty (DTAA) with Mauritius.
    • Trade mispricing is a tool used to siphon off money, plays an important role in bringing money back into India. Instead of inflating invoices, a business can under-invoice and export machinery or software. One can open a company to sell bags or a restaurant. The business may not take off, but the owner can still show cash sales of Rs 1 lakh to Rs 2 lakh a day. Slowly, but surely, all money would be legitimate one day!

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    Impact of Whitewashing Black Money on the Economy

    Along with the economic effects, black money also has social consequences. Some of them are mentioned below:-

    • Loss of revenue to the government and running of parallel economy in the country – It is the increase and spread of black money that poses a serious economic threat since it leads to a decrease in government revenues. If only some part of the black money that has been in circulation in the economy could have been paid as taxes to the government, it would have benefitted the Indian economy to a large extent.
    • Vicious circle as a result of black money and corruption – Black money has added to corruption by the illegal transactions made to hide the black money. Bribes are given by the people to bureaucrats, government officials, etc. This forms a vicious circle which is never going to end unless some serious step is taken by the government.
    • Effects on national income and real capita income– Black money is a result of revealing low income to the government while paying tax by people which results in low national income of the country. The national income of the country will take a big leap if the amount of black money in circulation is backed up to the national economy of the country. This will also increase the quality of life for the whole country.
    • Higher taxation and inflation – The main reason behind the taxation is to earn revenues for the expenditures done by the government to make a balanced budget. Therefore, it is obvious that if the amount of black money which the people are hiding from the government is revealed and included in the budget of the government then the tax rate will surely come down as the revenues which the government wants to earn from the people by imposing high taxes will already be with the government. Therefore the amount of goods and services which were there in the market according to the accounted money gets a hike in their prices which results in inflation.
    • Difficulty in the formation of monetary and fiscal policy – This is an obvious impact as the government while making these policies is not able to count the exact national income because of the hidden black money which makes such policies unrealistic.
    • Increased criminal activities in society– Black money usually gives rise to various illegal activities in society and corruption is one of them. The duration of the election is also the time when the illegal use of black money can be seen. Various terrorist activities have backup power of hoarders of black money which is even harmful to the whole country. The illegal weapons with various groups of unsocial elements are usually bought up by the use of black money.

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    Black Money in Startups – Conclusion

    The problem of black money should be solved in a real sense and a very rational manner.

    • First of all the problem is to be dealt with morally. The morals of the people in the society must be raised.
    • The tax system should be realistic in nature.
    • The authority which is responsible for the collection of taxes should be honest, without any corruption.
    • Various incentives should be given so that people voluntarily agree to disclose their real income.
    • The Economic Intelligence unit must be maintained thoroughly and should be looked after.
    • The corruption in administration must be stopped at all levels.
    • Startups should be aware of individuals who ask for higher credit in the company.
    • Limited kin involvement should be allowed.
    • The accounts must be looked after by the team and not the angel investors.

    The government alone cannot curb this issue completely from society. Making different policies, laws, acts and legislation will not work alone. For the implementation of these laws and policies, every citizen has to come forward. People should understand why it is important to pay tax and should stop evading their income and should not lead to the generation of black income. Every citizen should make some contribution to the development of the country in the form of paying taxes. By doing this, the economy will definitely decrease its black money, as well as startups will not need black money to operate.

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    Black Money in Startups – FAQs

    Why do Startups have Black Money?

    The social anomaly could appear in the world of budding talent, making the next generation soar to the highest levels of recognition and profit. This anomaly increases the need for black money in startups or businesses.

    What is Black Money?

    Black Money is the money that is earned through illegal activity and that money is not recorded for tax purposes.

    Are Startups a way to convert black money into white?

    Not always, because even startups fail. So if the startup fails, say in 2 years, then your money is gone. But it can be a way to convert black money into white. As the Startups have to pay taxes on raised money.

    Can a person convert black money into white through the stock exchange?

    No, even the money that is invested in the stock market is invested via banks. So if one breaches their bank limit, it automatically catches the eye of IT officials.

    There is no other way to convert black money into white besides paying taxes. If there would have been a way then no person has to leave their native country and roam like a fugitive.

  • List of Economic Relief measures announced by the Government for Startups and Businesses

    The Covid-19 had created a huge impact on the Indian economy and the lockdown due to the second wave had left a lot of people unemployed and a lot of businesses around the country to be closed down. However, the Government has announced various Economic Reliefs to boost the economy concentrating on various businesses and startups. In this article let’s look at more information on the Economic Relief Measures.

    Economic Relief Measures – Latest News
    Loan Guarantee Scheme
    ECLGS
    Support to the Tourism Industry
    Atmanirbhar Bharat Rozgar Yojana
    Subsidy on Fertilizers
    Underwriting of Additional Projects
    Other Economic Relief Measures
    FAQ

    Economic Relief Measures – Latest News

    The Finance Minister of the country, Nirmala Sitharaman had addressed the press conference on 28 June 2021 and has discussed about various economic relief measures. The Finance Minister has addressed various reliefs for the sectors affected due to Covid-19.


    Loan Guarantee Scheme

    The Finance Minister has announced a Loan Guarantee Scheme for the affected sectors due to Covid-19 of around INR 1.1 lakh crore. The Government will provide a guarantee coverage that is 70% for new projects and around 50% for the expansion and the duration for the guarantee will be up to 3 years.

    This is concentrated on the health sectors and medical infra specially targeting the underserved areas would get an amount of INR 50,000 crore. Other sectors would get INR 60,000 crore and the interest rates would be around 8.25 % p.a.

    ECLGS

    The Emergency Credit Line Guarantee Scheme of an additional INR 1.5 lakh crore has been announced. The coverage on Contact-Intensive sectors will be continued and the loan amount that is proposed and the limit of admissible guarantee is expected to increase above 20%.

    Support to the Tourism Industry

    The Government has announced to provide support to the tourism industry by providing monetary support to more than 11,000 travel and tourism stakeholders and tourist guides. The tourism sector will also be provided with loans under the new loan guarantee scheme for areas affected due to Covid.

    The Government has announced that it would provide loans that are 100% guaranteed up to INR 10 lakhs for the Travel and Tourism sector agencies and an amount up to 1 lakh for the licensed tourist guides.

    The Finance Minister also announced that they would provide free tourist visas and conveyed that once the issuance of visas is restarted the first 5 lakh visas will be issued free of cost and that is offer will be available only once per person. This scheme will be valid till 31 March 2022 or until the number reached 5 lakh tourists.

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    Atmanirbhar Bharat Rozgar Yojana

    The Atmanirbhar Bharat Rozgar Yojana has been extended from 30 June 2021 to 21 March 2022. The scheme provides incentives for the employers in order to increase the new employment opportunities through EPPFO.

    The Government has also approved an outlay of INR 22,810 crore that is expected to benefit around 58.50 lakh beneficiaries by providing them with a monthly wage of around INR 15,000. So far, the benefits of around INR 902 crore have been given to around 79,577 beneficiary establishments.

    Nirmala Sitharaman also stated through the press release that through this scheme from the last October until 18 June 2021 around 2.14 million people have been benefited from around 79,577 establishments.

    Subsidy on Fertilizers

    An additional subsidy for P&K fertilizers and DAP fertilizers has been announced. The NBS subsidy has been increased to INR 42,275 crore in the FY 2021-22 from INR 27,000 crore in the FY 2020-21. An additional amount of INR 14,755 crore is announced to be provided for DAP as well as NPK based complex fertilizers.

    The Government has also conveyed that an amount of INR 85,413 crores has been paid to the farmers.

    Underwriting of Additional Projects

    The Finance Minister also said that there would be underwriting of the additional export projects through the EXIM bank that is worth around INR 33,000 crore. The Minister also conveyed that in the span of the next 5 years there would be an equity infusion in the Export Credit Guarantee Corp of INR 88,000 crore.

    Other Economic Relief Measures

    Some of the other announcements during the press release include providing a viability gap funding of INR 19,041 crore for broadband connectivity in villages through Public Private partnerships, flexibility in claiming incentives linked to production by the large-scale electronics manufacturers, etc.

    Conclusion

    Narendra Modi, the Prime Minister of India had tweeted that the announcements will help in stimulating the economic activities, boost the production and increase the exports as well as increase the employment opportunities.

    FAQ

    How did Covid 19 impacted Indian economy?

    The economic impact of the COVID-19 pandemic in India has been largely disruptive. India’s growth in the fourth quarter of the fiscal year 2020 went down to 3.1%

    Is the Visa free under the Economic relief measure by the government?

    The first 5 lakh visas will be issued free of cost and the offer is only available once per person.

  • Why Experts believe GDP of India will grow by 10% this Financial Year

    The major cities of India have been under lockdown from the month of April and most of them have increased the lockdown to 31 May 2021 as of now. Even after the economic shutdown the Indian business magnate Rakesh Jhunjhunwala has conveyed positive sentiments towards the Indian economy and stock market, whereas certain institutions have conveyed that they expect around 10% growth in the GDP of the country. Let’s look at what they have spoken about the growth of the GDP in India.

    Rakesh Jhunjhunwala on GDP of India
    Rakesh Jhunjhunwala on Future of Indian Economy
    Rakesh Jhunjhunwala on Centre’s economic management
    Other Analysts on GDP of India
    FAQ

    Rakesh Jhunjhunwala on GDP of India

    In an interview with a senior journalist, the Indian business magnate, Rakesh Jhunjhunwala has disapproved of the sentiments of the media and showed a positive approach to the Indian economy. The interviewer had spoken to Rakesh Jhunjhunwala about various issues faced by the country such as growth rate, investment and GDP and added that the country is facing an economic crisis.

    Rakesh Jhunjhunwala had conveyed down all the worries and said that he expects that the country would have a 10% growth for this fiscal year.

    He added that considering the unexpected situation faced by the country, he expects the market to revive by the month of July which is with the reduction in cases due to the second wave of the pandemic.

    Rakesh Jhunjhunwala on Future of Indian Economy

    While the journalist had expressed about the rise in economic problems in the country such as rise in unemployment, the decline in the purchasing power of the individuals and added a question asking when the citizens of the country are losing their lives, no money in their pocket and while the bodies are floating on the river how the stock market was doing well.

    To the question, Jhunjhunwala answered that the market works on reality and not on the basis of sentiments. He said that the GST collection in the country during the month of April was 1.41 lakh crores and there has been a rise in the income of all the major companies from the past 3-4 quarters.

    The journalist had asked another question asking if the market is being manipulated and how can there be a positive sentiment by the investors when the unemployment is increasing. To this, he answered by saying that investments are made based on the future projections and it looks promising.

    GDP of India
    GDP of India

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    Rakesh Jhunjhunwala on Centre’s Economic Management

    After ensuring that the country’s economy is far from sinking, Jhunjhunwala had conveyed that he would give a score of 9 out of 10 for the economic management of the Centre. He also added that the effect of introducing major reforms in the sector such as agricultural, mining, labor and power sectors will be seen later.

    He also pointed out the digitalization made by the government which has helped people to transfer money easily within minutes whereas a few years back people had to pay transactional fees and wait for a while to transfer the money.

    He said that the GDP growth is in the right direction and added that the only way to get rid of poverty is to increase in growth which will, in turn, increase the wealth of the people.

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    Other Analysts on GDP of India

    Whereas multiple analysts and financial agencies have downgraded the GDP for the country for the present fiscal year. Barclays had predicted the GDP growth of India to be more than 10% in the beginning but now they have lowered it to 10%. The latest forecast was done by JP Morgan who has lowered it to 9%.

    The Chief Economist of the SBI group has said that there is a possibility for the economy of India to grow to the sub of 10% during the FY 2022. He added that the month of April was somewhat a washout, while May has been a complete washout and June is also expected to have a little bit of washout.

    FAQ

    Is India doing good in GDP?

    India’s economy had expanded by 3.1 per cent in the March quarter and FY20 GDP growth was around 4.2 per cent.

    What is the growth rate of Indian economy in 2020?

    GDP at Current Prices or Nominal GDP in the year 2020-21 is estimated to attain a level of Rs 195.86 trillion, as against Rs 203.51 trillion in 2019-20

    Which sector is backbone of Indian economy?

    MSME is considered as a backbone of Indian Economy.

    Conclusion

    He said that when all these factors are being taken into consideration the situation of the country is not looking so good. SBI economists have also cut the forecasts of the Indian economy from 11% to 10% and he added that they are focusing on that number until 31 May 2021.

  • Why UN believes India should invest in its Infrastructure to Revive the Economy

    India’s economy has been heavily hit due to the ongoing coronavirus pandemic and before the economy could recover the second wave has taken the country towards a roller coaster ride. The major cities in the country have been under lockdown in order to contain the virus. UN has recently mentioned that investment in infrastructure will help the Indian economy. Let’s look at how that is possible.

    UN’s Solution to India to revive the economy
    Sectors Indian Government should prioritize
    Deficit financing and the Public Sector
    Economy of other countries
    State of India’s Economy
    Requirement for the Indian Economic Recovery
    FAQ

    UN’s Solution to India to revive the economy

    According to a UN expert, India has to heavily invest on its infrastructure if they want to recover from the widespread economic destruction faced by the country due to the coronavirus pandemic. The country will have to invest in infrastructure even if they have to go towards deficit financing.

    Hamid Rashid who is the head of the UN Development Research Branch had conveyed in an interview to IANS TV on 12 May 2021 that, A crisis is always considered as an opportunity and an investment made at the right time in the right sector will create a multiplier effect in recovering the economy and also would make a substantial difference in the lives of people.

    He added saying that seeing India’s condition right now would make us a little despondent but he conveyed that there is a silver lining in their view where he cited the opportunity for the public sectors to invest in vital areas and the signs of progress in containing the virus.

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    Sectors Indian Government should prioritize

    Hamid Rashid continues saying that developing countries like India do not have an option to finance a stimulus programme similar to the US but he added that the country can make proper investments through Public Sector in order to recover the economy.

    He added that the Government will have to prioritize two major sectors health and digital. This is expected to be considered as an opportunity for the government and the Public Sector to increase their investments in the health infrastructure and digital infrastructure. This will create more jobs in the economy and in turn increase the demand for goods and services which will lead to the recovery of the economy.

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    Deficit Financing and the Public Sector

    In India currently, the shortage of oxygen is a huge constraint for India in order to save lives. This is an opportunity to create the right environment so that the businesses can invest more in building the healthcare capacities.

    There is also a need to gaping the digital infrastructure in the country. The countries like India do not have an option to raise taxes in order to meet the infrastructure requirements of the country and hence will have to choose deficit financing. Deficit financing is basically borrowing money from the future.

    Hamid Rashid has said that deficit financing is not a bad idea if the investments are made right. He added that deficit financing is not just necessary but it’s a must. When the businesses can’t take risks, when the private sector or the hospitals can’t take risks, then the only entity that can take risks is the Government.

    So, he said that what we have seen crisis after crisis is Public sector Investments and these investments are the ones that brings countries out of the crisis.

    He also added that with deficit spending one has to be very careful because if the amount is not invested properly then it would create a huge financial burden for the government and this debt balloon will increase over time.

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    Economy of other countries

    He had provided information about the Chinese and the Western economy. China had used investments for economic recovery. He added that the western side approach to fight against the coronavirus pandemic was through creating a demand side support by giving money to the households.

    Whereas China had chosen to increase their investments during the pandemic and it led to the creation of more jobs and now the demand has been increasing and the economy of China has seen a recovery and is expecting a growth rate of 8.2 % this year.

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    State of India’s Economy

    Hamid Rashid’s branch is involved in making the economic forecasts which are used as a base for policy suggestions. The mid-year report which was released on 11 May 2021 has forecast that Indian economy would see a growth of 7.5% this year and would see a rebound of 10.3 % next year.

    When the report was being prepared it was just the beginning of the second wave in the country and if the figures were recalculated right now the growth would be even less optimistic because of certain downside risks.

    He added that there is still a huge opportunity for India for the recovery as they are just starting from a very low base. Last year there was a significant contraction of the economy and this is considered to be the recovering stage. If the pandemic is under control within a month according to assumptions then there would be chances for the growth.

    If the Covid-19 cases increase for several months or for a full quarter then this target would seem very difficult and would see a downfall when the numbers will be updated. He said that if we remain optimistic then a 7.5 % growth rate is still possible.

    India's GDP
    India’s GDP

    Requirement for the Indian Economic Recovery

    The most important element required for the recovery of the Indian economy is considered to be vaccination. This will increase the confidence of the consumers and the businesses as it is very vital for the recovery.

    The news reports create a fear in the minds of people which stops the businesses to invest more as they will have a pessimistic approach and the consumers would not spend more as they feel that there are more bad days coming.

    Hamid Rashid conveyed that this is about managing the expectations and the best way to manage the expectations of the people right now is by ensuring everyone gets vaccinated as soon as possible which will help in the recovery of the economy.

    FAQ

    Is India a mixed economy?

    Yes, India has adopted a mixed economy.

    What is the important sector of Indian economy?

    Agriculture is the most important sector of Indian economy.

    Is Indian economy growing or not?

    India’s economy is estimated to contract by 6.9 per cent due to the coronavirus pandemic.

    Conclusion

    Covid cases in the major cities have been reducing but there is still concern about the infections being spread to the rural areas. Vaccination, social distancing and other measures are expected to work even though it doesn’t create any magic but would help in containing the virus.

  • What are Stocks & Bonds and Which one is Right for You

    Stocks and bonds should be a common term that everyone should know. But sadly, most of us don’t have adequate knowledge on what a stock or bond is. Here we can look at the meaning of stocks and bonds and even analyze which one is the best option for you as an individual.

    What are Stocks
    Benefits of Stocks
    What are Bonds
    Benefits of Bonds
    Which one is Right for you
    FAQ

    What are Stocks

    Stocks represents the ownership of a fraction of a corporation. Most of the time when a company requires extra capital, they list their company’s stocks on the stock market. In simple terms, they sell a part of the share of their company to the general public and in return, they would receive money.

    When you buy a share of the company you become an owner of the company. The person who buys the shares of the company will be called an investor and the company which lists their stocks will be a Public limited company.

    The companies will have to show their business activities every year to the general public. It will be available to each and every individual even if you don’t hold a share in the company.

    There are two groups of people in the stock market. One group are investors who buy the shares of companies and hold them for years expecting the share prices to rise. The second group is traders – they buy and sell different shares of different companies in a short period of time mostly in a single day.

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    Benefits of Stocks

    Stocks are considered to be risky. But if invested wisely you would get unimaginable returns from it. Stocks are also called as equities. People consider stocks as one of the investment options. Stocks have proven to beat the inflation rates over the years and is a form of security that shows that you hold a piece of ownership in the company.

    Certain companies even provide dividends to their stockholders. Dividends are part of the profits the company earns during the year. So, in addition to the increasing of the value of stocks, you would even receive a part of the company’s profits with it.

    Bombay Stock Exchange
    Bombay Stock Exchange

    What are Bonds

    Bonds are also a financial instrument. In simple terms, if the company or the government requires money, they issue bond certificates. Sometimes government would require some funds to develop a new road or come up with new infrastructure in the city or companies. The government would want to open new branches at that time so they would opt to raise funds through the issue of bonds.

    When you buy a bond certificate you are lending money to the government or the companies. They will have to pay back the money they owe you plus the interest.

    There are different types of bonds and there are agencies that rate the bond. The bond certificates with the highest rating will be the safest bond and vice versa.

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    Benefits of Bonds

    Bonds are less risky than shares. They provide higher returns compared to bank deposits. There are certain bonds that are tax-free or even charged less tax compared to other instruments. Bondholders will have more preference than shareholders in a company.

    If the company is closing down, the bond holders will be paid first and then the shareholders will be paid. However, while buying a bond one should wisely choose it according to the credit ratings given to the bonds and a proper check about the company issuing the bonds.

    Which one is Right for you

    Stocks and bonds have their own advantages and disadvantages. Stocks are considered to be riskier than bonds. Whereas stocks can provide really high returns than bonds. If you are ready to take high risks you can invest in stocks but if you want comparatively lower risk then you can go for investing in bonds.

    However, one cannot blindly invest in either stocks or bonds. Before you invest in stocks you will have to learn the basics of the stock market, fundamental and technical analysis. You should always do your own research before investing in stocks and never invest based on anyone else’s advice.

    Even investing in bonds requires prior research. You will have to check the ratings and then invest in bonds. Certain investors invest in bonds and stock markets together to manage their risk. They will invest in proper ratios so that they will be able to get an average return from both instruments.

    Choosing to invest in stocks or bonds can be according to your risk appetite.

    FAQ

    What are the 4 types of stocks?

    Growth stocks, Yield stocks, IPOs, and Defensive stocks are the 4 types of Stocks.

    What is the safest investment?

    Certificates of deposit (CDs), money market accounts, municipal bonds and Treasury Inflation-Protected Securities (TIPS) are among the safest types of investments.

    What stocks lost the most in 2020?

    Occidental Petroleum Corp, (OXY) Coty (COTY), Marathon Oil Corp, (MRO) TechnipFMC (FTI), Carnival Corp. (CCL) stocks lost the most in 2020.

    Conclusion

    If you do not have the time to do the research of a company there are companies that invest on behalf of you. There will be fund managers who would invest your money on behalf of you and provide you with the returns. Those are called Mutual fund companies. Now there are apps like Groww, smallcase, Etc., which help you in investing in bonds and stocks.

  • Recent Trends Fueling Investment in the Indian Market

    India is fast becoming a home for startups. With several initiatives that were undertaken by the Government to strengthen the economic state of the country, startups have witnessed a growth in mobility, food tech, gaming, and many other fields. The Confluence of social as well as technological factors has deeply impacted the investment scenario in the country. With the private sector underutilized, investments in the Indian market have increased.

    The 21st century is all about Technologies like augmented reality and IoT, the new addition to the family being Blockchain Technology. This technology is not only limited to the creation of Bitcoin but has other applications too, which has raised a hype on the market.  If explored its full potential, this technology can bring about revolutionary changes in various segments.

    Investment Trend in India

    Over 22 major languages are written in 13 different scripts and over 19, 500 dialects, that’s India, a culturally and linguistically diverse nation. These numbers clearly indicate a massive opportunity in the Indian market for vernacular interface and content. It aims at accommodating non-English speaking users with internet access and a medium to pitch in their ideas. People are making investments in different industries that are trending in the startup world. Let’s take a look at the industries that are trending and are becoming hot zone for investments.

    ESports
    Social Commerce
    Live Streaming
    Fintech
    Direct-to-Consumer
    Blockchain Technology

    ESports

    Esports has exploded with popularity and is one of the fastest-growing industries in the world. Esports and gaming took off with the release of Xbox in early 2000, even though the concept of video games had been there since the 1970s. Realizing the potential in this segment, developers pitched in this virtual world. By the year 2024, the global revenue of this industry is set to reach $1.08 billion

    Social Commerce

    Through social commerce, a user can browse and compare products on social networking sites, say Facebook, and then make the purchase on Facebook itself rather than going to the company’s website to make the purchase. Currently, there are three social media sites that own the social commerce space: Facebook, Twitter and Pinterest. It is revolutionizing the face of online shopping and moulding e-commerce to give the customer a more social experience involving friends, family and peers.

    Live Streaming

    By providing real-time content, live streaming is a new way to attract and engage users by enabling them to connect instantly. The viewers can also communicate with each other on this platform. It gives the product or the service immediate feedback. This is a powerful marketing tool that the users find interactive and more engaging.

    Fintech

    With global giants zeroing on this space, financial technology is on the roll due to several reasons. With vast discrepancies in the country’s banking system, growing smartphone ownership, increasing access to the internet, a booming e-commerce market, and availability of a large talent pool with knowledge of both technology and financial services.

    Direct-to-Consumer

    Direct-to-consumer brands are transforming conventional and established marketing solutions by causing a fundamental change in the relationship of the brand with the consumers. Global suppliers are accessible now and consumers are willing to experiment with new brands that they discover online. Consumers are quite discerning in the quality of items they purchase, this is exactly what the DTC offers, a risk-free online shopping experience.

    Blockchain Technology

    Blockchain Tech has attracted the attention of people and has extreme potential to go big in the future. Apart from cryptocurrencies like Bitcoins, it has many other potentials in the field of healthcare, insurance, artist royalties, voting and welfare benefits. NFTs are also peeking its head through this technology and people are taking an interest in them.

    Conclusion

    The startup ecosystem in India is growing every day, people are finding this enigmatic and are keeping their interest in these fields. It is quite natural that investors are going to follow the trends as they give hints about which market is in for the long run. Investors create their strategies according to them and invest in those fields.

    FAQs

    What is Blockchain Technology?

    Blockchain Technology is a public ledger that exists across the network and is decentralized in nature and it can be distributed digitally.

    What is a Market trend?

    A market trend is the moving of the market in a particular direction and it can be identified by price action.

    Esports is quite popular in India, the gaming industry has rapidly grown over the years.